The leaders of some of the country’s largest companies have enjoyed almost a 12 per cent pay rise this year, despite the fall of many share prices.

Major companies including Telstra, Qantas and BlueScope Steel are expected to be targeted by investors under the government’s new executive pay laws, which hand shareholders the power to remove an entire board.

The 11.8 per cent pay rise is in stark contrast to the 20 per cent fall that shareholders have suffered since the peak of the market in early April.

The Australian Shareholders Association said that the previous three months had left shareholders worse off than they were at the start of last financial year.

“The markets have all dropped back and shareholders are sitting on those losses while watching ­executives receive million-dollar ­payouts for ­performance which has evaporated in just a few months,” policy adviser Les Goldman said.

A third of the top 50 companies have now disclosed the pay packets of their top executives in their annual reports ahead of the shareholder voting season, which is now under way.

Analysis by The Australian Financial Review reveals that the chief executive officers of the top 50 com­panies that have disclosed their pay received an average 11.8 per cent increase in their take-home pay last financial year.

The debate over executive pay reignited after the revelation that Coles supermarket boss Ian McLeod is now Australia’s highest paid executive, receiving $15.63 million this year. Other companies to draw fire have included BlueScope Steel over the payment of $3.05 million in bonuses to executives, despite the company posting a $1 billion full-year loss and massive job losses.

Stockland managing director Matthew Quinn received a pay rise of almost $1 million to $5.7 million this year, despite the company’s share price falling 26.7 per cent over the same period.

Telstra chief executive David Thodey’s total pay package jumped by 60 per cent to $5.1 million this year and Qantas chief executive Alan Joyce received a 71 per cent pay rise in total pay to $5 million.

However, the analysis by the Financial Review excludes potentially lucrative long-term share payments, so it provides a more realistic picture of the CEOs’ actual take-home pay.

The results were skewed by the ­dramatic increase in the take-home pay of QR National’s Lance Hockridge from $1.1 million to $3.4 million after the company listed on the stock exchange last year.

And the total pay packet of last year’s highest paid executive, outgoing CBA chief Ralph Norris, almost halved from more than $16 million to $8.6 million due to the bank’s unique pay program, which ties long-term incentives to customer satisfaction.

Mr Norris caused a customer backlash last Melbourne Cup day when the bank lifted mortgage rates by nearly double the Reserve Bank’s rise in official cash rates, but his take-home pay remained relatively stable, falling from $4.81 million to $4.76 million.

Excluding Mr Hockridge’s and Mr Norris’s pay from the results meant that take-home pay for the CEOs rose by a more modest 8.5 per cent, but total pay packets (including the lucrative long-term incentives) went up by almost 15 per cent.

The results also excluded Suncorp Group chief executive Patrick Snowball. Suncorp has not released full details of its pay plan in its annual report, but an ASX announcement reveals he has been reappointed on an increased package with his fixed pay rising from $1.75 million to $2.55 million plus a short-term bonus of up to 150 per cent. He will also receive a $4 million share payment if he remains employed at this time next year.

Former Fortescue Metals Group chief executive Andrew Forrest, now non-executive chairman, also received an anomalously small sum of $426,542, up from $282,060 last year. But his estimated $6 billion wealth largely derives from his directly held 31 per cent stake in Fortescue.

Wesfarmers chief executive Richard Goyder defended Mr McLeod’s salary as Coles managing director, saying it was an appropriate reflection of the “global scale” turnaround that the Scotsman had engineered at the retailer. “We took over a business that was in really poor shape and we knew we had to bring world-class management to Coles and we have done that,” Mr Goyder said.

The results support a long-term trend of CEO pay increasing at a greater rate than shareholder returns.

Research by the Australian Council of Superannuation Investors shows that the top 100 chief executives’ pay outstripped shareholder returns by more than three times over the past decade.

“There is a major concern as paying CEOs cash bonuses and high cash salaries protects them from the volatility experienced by shareholders,” said Ann Byrne, chief executive of ACSI, which represents superannuation funds investing $300 billion.

But a director at proxy adviser CGI Glass Lewis, Aaron Bertinettin, said the outcome would have been much worse this year but for companies moving to defer up to 50 per cent of short-term bonuses in the wake of the global financial crisis.

This year, shareholders will have the power for the first time to vote individual directors off boards if they are unhappy about remuneration policies under the so called “two strikes” rule.

From July, a protest vote of more than 25 per cent against a company’s remuneration report over two consecutive years triggers a vote on whether the entire board should be spilled. That vote requires a 50 per cent ­majority.

Rio Tinto would have fallen foul of the rule earlier this year. Last year, four of Australia’s other largest 100 companies – Challenger, Transurban, Downer EDI and Lynas – would also have faced a board spill.

However, Mr Bertinettin is concerned that shareholders will be much more conservative when they vote this year because the two strikes rule could destabilise boards.

“There are great unknowns this year because of the uncertainty on whether shareholders will be willing to pull the trigger on a ‘strike’. The early signs are that the reform has done the exact opposite of what was intended by the government, it has created a disincentive for shareholders to publicly have a go at companies,” he said.

“The great thing with a non-binding vote is that you could express your opinion without having any prescriptive consequences, but now there are outcomes which go far beyond remuneration and I think people are probably a bit wary,” Mr Bertinettin said.

CGI Glass Lewis recommended that shareholders vote against the pay plan of building materials ­supplier Alesco Corp, which handed a 25 per cent bonus to executives, despite a $2.7 million profit downgrade last month. However, almost 95 per cent of investors passed the plan this month.

And earlier this month, grocery and hardware wholesaler Metcash narrowly avoided becoming the first company to sustain a strike, by 1 per cent of the vote.

The chief of the government’s Future Fund, David Murray, has also signalled that he would take a cautious approach to executive pay this year in response to a recent question by the Financial Review.

“The main consideration for us is to ensure that there is a consistency in the modelling between a value outcome to the shareholder and the structure of the remuneration,” he said.

“On occasion we have voted against remuneration plans where we don’t see that consistency.”

with Peter Kerr

The Australian Financial Review

BY Patrick Durkin

Patrick is The Australian Financial Review's Melbourne bureau chief and deputy editor of BOSS magazine. He writes features across business and politics.